CIRCULAR

GLIDING THE ADJUSTMENT OF WORK CONSTRUCTION COST ESTIMATES

Pursuant to the Government's Decree No. 36/2003/ND-CP of April 4, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Construction;
Pursuant to the Governments Decree No. 16/2005/ND-CP of February 7, 2005, on management of investment projects on the construction of works and Decree No. 112/2006/ND-CP of September 29, 2006 amending and supplementing a number of articles of the Government's Decree No. 16/2005/ND-CP on management of investment projects on the construction of works;
Pursuant to the Governments Decree No. 99/2007/ND-CP of June 13, 2007, on management of work construction investment expenditures;
Pursuant to the Government's Decree No. 03/2008/ND-CP of January 7, 2008, amending and supplementing a number of articles of the Government's Decree No. 99/2007/ND-CP of June 13, 2007, on management of work construction investment expenditures;
Pursuant to the Government's Decree No. 166/2007/ND-CP of November 16, 2007, providing for the common minimum wage level;
Pursuant to the Governments Decree No. 167/2007/ND-CP of November 16, 2007, providing for region-based minimum wage levels for laborers working for Vietnamese companies, enterprises, cooperatives, cooperative groups, farms, households, individuals and other labor-employing organizations;
Pursuant to the Labor, War Invalids and Social Affairs Ministry's Circular No. 29/2007/TT-BLDTBXH of December 5, 2007, guiding the application of the common minimum wage level and region-based minimum wage level in state companies and one-member limited liability companies where the State holds 100% charter capital.
The Ministry of Construction guides the adjustment of work construction cost estimates from January 1, 2008, as follows:

I. GENERAL PROVISIONS

1. This Circular guides the adjustment of cost estimates for the volumes performed from January 1, 2008, under state-funded works or bidding packages (referred to as work construction cost estimates) for which the investment deciders have not yet decided to switch the management of work construction investment expenditures under the Government's Decree No. 99/2007/ND-CP of June 13, 2007.

Work construction investment projects funded with other capital sources are encouraged to apply regulations on adjustment of cost estimates guided in this Circular.

2. Work construction cost estimates formulated using construction, installation and construction survey unit prices set by provinces or centrally run cities on the basis of wage scales of the wage table A.1.8 promulgated together with the Government's Decree No. 205/2004/ND-CP of December 14, 2004, with the minimum wage level of VND 450.000/month, will be adjusted as prescribed in the Appendix to this Circular.

3. For works for which separate unit prices or machine-shift costs have been formulated using the minimum wage level specified by competent persons, work construction cost estimates will be adjusted using the new common minimum wage level or new region-based minimum wage level in accordance with the principles and methods guided in this Circular.

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5. For works under work construction investment projects implemented under the Government's Decree No. 99/2007/ND-CP of June 13, 2006, on management of work construction investment expenditures, investors shall use contingency funds for price increase to adjust the expenditure structure in the work construction cost estimates.

II. SPECIFIC PROVISIONS

Work construction cost estimates formulated using construction unit prices set by provinces or centrally run cities on the basis of the minimum wage level of VND 450,000 per month and wage scales in the wage table promulgated together with the Government's Decree No. 205/2004/ND-CP of December 14, 2004, are adjusted as follows:

1. Adjustment of construction cost estimates

1.1. Adjustment of labor expenses

Labor expenses in construction cost estimates formulated using local construction unit prices will be multiplied by an adjustment coefficient (K^DC NC) in conformity with the adjustment of the common minimum wage level or region-based minimum wage level.

The adjustment coefficient (K^DC NC) is determined as being equal to the new minimum wage level or region-based minimum wage level divided by the minimum wage level used for unit price calculation (VND 450,000/month).

1.2. Adjustment of construction machine expense

Construction machine expenses in construction cost estimates formulated using local construction unit prices will be multiplied by an adjustment coefficient (K^DC MTC) in conformity with the adjustment of the common minimum wage level, region-based minimum wage level and fuel and energy prices in January 2008.

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According to the above-said principle, the coefficient (K^DC MTC) for adjustment of construction machine expenses in construction expense estimates made by provinces and centrally run cities will comply with the enclosed Appendix. The coefficient applicable to provinces or cities with a particular construction structure will be decided by provincial/municipal People's Committees.

For works which are built in lines running through several provinces or centrally run cities for which separate machine-shift price tables have been formulated, investors shall calculate and report adjustment coefficients to investment deciders for decision.

1.3. Expenses calculated in proportion (%) to construction cost estimates

Expenses calculated in proportion (%) to construction cost estimates include: other direct expenses, common expenses, pre-calculated taxable incomes, value added tax amounts, expenses for makeshift houses at construction sites for accommodation or construction administration as prescribed.

2. Some other expenses

Expenses such as those for management of work construction investment projects, project elaboration and construction work designing are calculated in a percentage (%) as prescribed.

Labor expenses in construction survey cost estimates will be adjusted using an adjustment coefficient (K^DC NCKS) prescribed in Table 2 in the Appendix to this Circular.

Particularly, pre-tax cost estimates for elaboration of urban construction planning will be determined on the basis of the construction planning expense limits promulgated together with the Construction Minister's Decision No. 06/2005/QD-BXD of February 3, 2005, multiplied by adjustment coefficient K^DC QHXD= 1.25.

For cost estimates for provision of urban public services, provincial-level People's Committees shall based themselves on specific local conditions to guide the adjustment.

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1. For works under work construction investment projects for which investment deciders have not yet decided to switch the management of work construction investment expenditures under the Government's Decree No. 99/2007/ND-CP of June 13, 2006:

1.1. Provincial/municipal People's Committees shall, based on the guidance in this Circular and regulations on the minimum wage level, region-based minimum wage level and wage-based allowances, guide the adjustment of work construction cost estimates of state-funded construction works.

Provincial/municipal Construction Services shall assume the prime responsibility for, and coordinate with concerned local agencies in, determining adjustment coefficients for submission to provincial/municipal People's Committees for promulgation and application.

1.2. Ministries, economic groups and state corporations shall guide the adjustment of work construction cost estimates of work construction investment projects under their investment decision competence under the guidance of this Circular.

1.3. Investors shall organize and approve the results of adjustment of work construction cost estimates in accordance with, current regulations.

1.4. For construction works for which separate unit prices have been formulated (work construction unit prices), investors shall base themselves on regimes and policies permitted by the State for application and the principles of adjustment of work construction cost estimates guided in this Circular to determine the levels of adjustment of labor expenses, construction machine expenses and other expenses (if any) in work construction cost estimates.

2. For works of work construction investment projects implemented under the Governments Decree No. 99/2007/ND-CP of June 13, 2007, on management of work construction investment expenditures, their cost estimates shall be adjusted under the guidance at Point 4, Section I, of this Circular.

This Circular takes effect 15 days after its publication in "CONG BAO."

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APPENDIX
(Attached to the Construction Minister's Circular So. 03/2008/TT-BXD of January 25, 2008)

To adjust work construction cost estimates formulated using construction, installation and construction survey unit prices determined by provinces or centrally run cities (on the basis of wage scales of wage table A.1.8. promulgated together with the Government's Decree No. 205/2004/ND-CP of December 14, 2004, with the minimum wage level of VND 450,000/month) before the effective date of the Government's Decree No. 99/2007/ND-CP of June 13, 2006, on management of work construction investment expenditures:

1. Adjustment of construction cost estimates

1.1. Adjustment of labor expenses and construction machine expenses

Labor expenses and construction machine expenses in construction cost estimates will be multiplied by the adjustment coefficients (K^DC NC) and (K^DC MTC) prescribed in Table 1 of this Appendix.

1.2. Expenses calculated in proportion (%) to construction cost estimates.

Other direct expenses, common expenses, pre-calculated taxable incomes, value-added tax amounts and expenses for construction of makeshift houses at construction sites for accommodation and construction administration will be calculated in a percentage as prescribed.

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2.1. Adjustment of construction survey cost estimates

Labor expense in construction survey cost estimates will be multiplied by the adjustment coefficient (K^DC NCKS) prescribed in Table 2 of this Appendix.

2.2. Adjustment of labor expenses in cost estimates for testing construction materials and structure.

Labor expenses in cost estimates for testing materials and construction structure determined using norms and unit prices for testing materials and construction structure promulgated together with the Construction Minister's Decision No. 32/2001/QD-BXD of December 20,2001, will be multiplied by the adjustment coefficient (K^DC NCTN) prescribed in Table 3 of this Appendix.

2.3. Other expenses which are calculated in proportion (%) to work construction cost estimates will be calculated according to current regulations of the State.

Table I. Coefficients for adjustment of construction cost estimates

Minimum wage level

VND 540,000/month

VND 580,000/month

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Adjustment coefficient K^DC NC

1.20

1.29

1.378

Adjustment coefficient K^DC MTC

1.08

1.1

1.12

Table 2. Coefficients for adjustment of construction survey cost estimates

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VND 540,000/month

VND 580,000/month

VND 620,000/month

Adjustment coefficient K^DC NCKS

1.20

1.29

1.378

Table 3. Coefficients for adjustment of cost estimates for testing materials and construction structure

Minimum wage level

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VND 580,000/month

VND 620,000/month

Adjustment coefficient K^DC NCTN

2.83

3.04

3.25